A recent report from the United Nations Conference on Trade and Development (UNCTAD) reveals a decline in Foreign Direct Investment (FDI) flows to the Global South, reaching $841 billion amidst a backdrop of weak investment and economic uncertainty worldwide. FDI is a crucial source of capital, especially for infrastructure projects.
According to UNCTAD’s Global Investment Trends Monitor, FDI flows to developing countries experienced a 9% decrease to $841 billion in 2023. Developing countries in Asia bore the brunt of this decline, with a 12% drop, while flows to Africa and Latin America and the Caribbean remained relatively stable.
The global decline in FDI to developing regions in 2023 occurred amid an environment of weak investment and economic uncertainty. Despite defying earlier expectations and showing a marginal 3% growth to an estimated $1.37 trillion worldwide, the report notes that this increase was primarily driven by higher values in select European “conduit” economies.
However, when excluding these conduit economies, the global FDI flows witnessed a significant 18% decline in 2023.
In Africa, FDI flows remained nearly unchanged at an estimated $48 billion, representing a slight one percent decrease compared to the previous year. Despite an increase in greenfield project announcements, particularly in Morocco, Kenya, and Nigeria, concerns arise due to a significant one-third reduction in project finance deals, surpassing the global average. This reduction raises apprehensions about the future of infrastructure financing on the continent.
The report underscores the challenges faced by developing regions, especially in Asia, as they grapple with declining FDI in the midst of global economic uncertainties. While some regions remain stable, the reduction in project finance deals emphasises the need for sustained efforts to ensure adequate infrastructure financing in the face of changing global investment trends.
